Managing the Law Chapter 17 Electronic Commerce. © 2003, Pearson Education Canada.17.2 Chapter 17...

Managing the Law

Chapter 17Electronic Commerce

© 2003, Pearson Education Canada.17.2

Chapter 17 Overview

electronic commerce legislation- Canada’s Uniform Electronic Commerce Act- provincial electronic commerce legislation

contracting online- contract formation- automated electronic commerce- authentication- information security- domain names

internet access provider and online service provider liability- jurisdiction- online intermediaries

online consumer protection


Electronic Commerce

technologically-mediated business transactions usually involves the transportation of goods,

services, or information- physically or digitally

advantages:- saves transaction costs and time - allows the reach of more customers in more places

disadvantage:- uncertainty in the law


UNCITRAL

United Nations Commission on International Law encourages countries to create uniform legislation

- based on the Model Law on Electronic Commerce- does not create powers, obligations, immunities- provides a model for consistent laws- the extent to which the model is decided by each

government


Canadian Legislation

the Canadian Constitution states that commerce is generally a provincially regulated matter- electronic commerce has been enacted on a

province-by-province basis the coordination of the regulation of electronic

commerce is desirable at the national level- the Uniform Law Conference of Canada created a

model law called the Uniform Electronic Commerce Act (UECA), based on the UNCITRAL model law

- has no legal force- forms the basis of most electronic commerce laws in

Canada


Uniform Electronic Commerce Act

scope- UECA lists the transactions to which it does not

apply- excludes wills and dealings in land- the list of exclusion varies by jurisdiction

consent- UECA provides a means to facilitate electronic

commerce for those who expressly or impliedly choose to engage in it



functional equivalence- UECA identifies the essential purpose of a traditional

rule and indicates how that purpose can be accomplished electronically

- a writing requirement can sometimes be satisfied through the click of a mouse

electronic contracts- transactions may be achieved without human

intervention- enforceable contracts may be created by shopping

bots or automated electronic devices



sending and receiving electronic documents- a message is deemed to be sent from the sender’s

place of business and received at the recipient’s place of business

- a message is deemed sent when it leaves the sender’s control

- a message is deemed received when it reaches an information system in the control of the person to whom it is sent

- the Act does not change the common law rules regarding the communication of acceptance



government documents- UECA contains provisions regarding electronic

documents that are sent to government- a government can specify the formats it is willing to

accept


Provincial Electronic Commerce Legislation

provinces have adopted the UECA model entirely, with minor variances, or have used different approaches- New Brunswick

- does not regulate the process of offer and acceptance- Quebec

- more extensive than other provinces- contains detailed provisions regarding the

consultation and transmission of documents that have legal implications for third parties

businesses should consult the relevant legislation in each province or territory it operates in


Contracting Online

some aspects of contracting online are not completely governed by electronic commerce legislation

some uncertainties remain:- contract formation- automated electronic commerce- authentication and security


Contract Formation

shrink-wrap license- when mass-marketed software is placed in a

package that is wrapped in clear cellophane- a license is created when a consumer removes the

cellophane- by removing the cellophane, the consumer agrees to

abide by rules of use shown on a card underneath it


Contract Formation

click-wrap license- when a person accepts the terms of a licensing

agreement with the click of a mouse web-wrap license

- when a person accepts the terms of a licensing agreement by some form of online interaction

- terms of an online contract are effective only if they are reasonably brought to the parties’ attention


Contract Formation

the traditional rules of offer and acceptance apply to online contracts

a website should be designed to provide invitations to treat rather than offers

whether a particular electronic transmission is considered instantaneous or non-instantaneous depends on the circumstances and is determined on a case-by-case basis

redundant means of communication help businesses overcome the risk of messages being lost or delayed in cyberspace


Automated Electronic Commerce

automated transactions do not easily fit within traditional notions of contract, such as a “meeting of the minds”

transactions may not involve human interaction automation allows systems to act intelligently and

independently from their human creators most provincial electronic commerce statutes

allow contracts to be created by automated electronic devices

most of the provincial statutes specify exceptions that render automated transactions unenforceable


Keystroke Error

occurs when a person mistakenly hits a wrong button or key

legislation may render a contract unenforceable when the mistaken party can prove that- the automated system did not provide an

opportunity to prevent or correct the error- the other party was notified of the error as soon as

possible- reasonable steps were taken to return any benefit

received under the transaction- no other material benefit was received from the

transaction


Authentication

an authentication function identifies the signatory and ties that person to a document

useful when the identity of a party is important helps to manage risk when doing business with

strangers often uses electronic signatures


Electronic Signatures

usually involve- a certification authority

- a trusted third party that provides a transaction partner with a digital certificate - an electronic document that authenticates information such as identity, age and security clearance of a particular person

- public key cryptography- the sender encrypts a signature into unreadable

ciphertext with a private key - the receiver decrypts the encrypted signature into a

readable form with a public key


Public Key Infrastructure (PKI)

set of policies and procedures that provides a high level of security

allows certification authorities to provide digital certificates- a digital certificate can be followed, traced and

linked instantaneously as it moves around may create the “most pervasive electronic

surveillance system ever built” crucial to the success of internet commerce when

used with other security measures


Information Security

is used to protect against the threat of tampering, interception, worms, viruses, and logic bombs

involves a combination of communications security and computer security- communications security protects information while

it is transmitted from one system to another- computer security protects information within a

computer system may involve the use of hardware, software, strict

workplace policies, personnel security


Using the Law to Protect Security

businesses can protect their security interests by using the law as a deterrent

the Criminal Code of Canada prohibits- unauthorized use of a computer under s. 342.1- computer mischief under s. 430(1.1)- interception of private communications under ss.

283 and 184 contractual terms and confidentiality agreements

can be used to protect security interests


Other Ways to Protect Security

a business should create, publicize, and enforce a policy governing- the use, disclosure, and return of confidential

information- the use of the internet- permission to monitor employee communications

a business can reduce some security risks by outsourcing to security providers


Domain Names

a domain name locates an organization on the internet

a cybersquatter purchases a potentially valuable domain name with the intention of later selling it to the highest bidder

if no one claims a prior right to a particular domain name, the first person to register it becomes the owner and has the right to resell it


Disputes About Domain Names

disputes about domain names usually fall into three groups:- a person may have innocently registered a domain

name that was later disputed- a person may have registered a domain name in

which it claimed commercial right, to which other parties also claim a commercial right

- a person may have registered a domain name in which it had no commercial right


Disputes About Domain Names

in some circumstances, parties are entitled to litigate disputes about domain names- costs time and money, and a determination of the

appropriate court to hear the matter the bodies that regulate domain names (eg CIRA)

have adopted procedures to resolve disputes primarily through arbitration

the best strategy is to minimize the potential for domain name disputes- businesses should register bona fide trademarks

and business names as early as possible


Jurisdiction

jurisdiction refers to the ability of a court from a particular place to hear a case- three tests can be used to determine jurisdiction

- real and substantial connection test- passive versus active test- effects-based test


Jurisdiction

real and substantial connection test- usually used in Canada- considers whether the plaintiff’s cause of action and

the effects of the defendant’s conduct are sufficiently linked to the place in which the plaintiff wants to sue

passive versus active test- considers the level of interactivity between the

parties and the commercial nature of the exchange of information that occurs on the website


Jurisdiction

effects-based test- focuses on the actual impact that a website has in

the place where jurisdiction is being sought a business can avoid targeting a jurisdiction by

- inserting a jurisdictional clause into its contract that requires disputes under the agreement to be heard in a specified place

- restricting the geographical area in which it does business


Online Intermediaries

an online intermediary is a party that enables or facilitates an online transaction between others- internet access providers- online service providers


Internet Access Providers

provide access to the internet, often for a fee supply the pipeline, do not monitor flow generally are not liable if someone uses the

internet service to cause some harm employee actions may attract liability to an

employer if internet access is provided for free by the employer


Online Service Providers

provide goods or services beyond mere internet access in exchange for something of value- e-mail suppliers, bulletin board operators, auction

hosts an exclusion clause may shield an online service

provider from liability towards its customers exclusion clauses do not shield an online service

provider from liability to a third party- when a customer uses Yahoo! to distribute a

defamatory statement, the victim of that tort may sue both the customer and the online service provider


Liability of Online Intermediaries

two US decisions suggest- a distributor is liable only if it actually knows that an

illegal message was posted but does nothing- a publisher who exercises editorial control over the

contents of its bulletin boards is liable for an illegal message in any event

- service providers who exercise no editorial control over their sites are immune from liability

these decisions discourage service providers from monitoring their sites and removing offensive material



in the United States and the United Kingdom, legislation protects online service providers from liability in some circumstances

in Canada, those issues are not consistently addressed- Quebec has enacted an Act to Establish a Legal

Framework for Information Technology- service providers acting as intermediaries are not

generally responsible for illegal acts of service users- service providers may incur liability if they participate

in acts performed by service users



to shield itself from intermediary liability, a business should- have a clear contract with each user

- require clear consent to terms of service- explain and provide examples of acceptable and

unacceptable uses- require indemnification from a user if the business is

found liable for something a user has posted

- set up operations such that it can demonstrate that the business merely acts as a conduit or pipeline for the materials


Online Consumer Protection

a dot-con is a con artist who uses the internet to defraud customers

multi-level marketing is a system of marketing that puts more emphasis on recruiting distributors than on selling products- the products at the heart of the sales pyramid are

usually overpriced and shoddy- people often pay more for their supplies and

promotional materials than they will ever earn in sales


Some dot-cons

duplicitous actions hidden-term contracts forged invoices deceptive advertising fraudulent credit card charges fictitious business opportunities miracle cures


Consumer Protection

by adopting consumer protection principles relating to electronic commerce, a business can enhance its reputation and strengthen consumer confidence

Industry Canada has promoted a set of guidelines that suggest ethical and effective business practices that are intended to supplement the laws that already protect consumers


Consumer Protection Guidelines

consumers should be provided with clear and sufficient information to make an informed choice about whether and how to make a purchase

vendors should take reasonable steps to ensure that the consumer’s agreement to contract is fully informed and intentional

vendors and intermediaries should respect privacy vendors and intermediaries should take reasonable steps to ensure that the

transactions in which they are involved are secure consumers should have access to fair, timely, effective, and affordable means for

resolving problems with any transaction consumers should be protected from unreasonable liability for payments in

transactions vendors should not transmit commercial e-mail without the consent of consumers,

unless a vendor has an existing relationship with a consumer businesses should promote consumer awareness about the safe use of electronic

commerce

Managing the Law Chapter 17 Electronic Commerce. © 2003, Pearson Education Canada.17.2 Chapter 17...

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